A Tale of Two Worlds: Holland and Nepal

The taxi pulled up to my house. I took out cash and prepared to pay for the ride. “Mister, how much?” The journey from Holland to Nepal was pleasant enough, but little did I know I was about to encounter a bit of psychological trickery and cultural shock to get me to pay more for the lift. Chances are you’re paying more, too.

Digital payment systems in Holland made life easy. At the same time, one hardly thought of how much money was changing hands for any given transaction. The price for everything, including taxi service, was fixed. Taxi drivers had to follow strict rules and couldn’t charge any extra money or tips, nor could they haggle for the fare. One always knew exactly how much to pay.

However, the price for the same service in Nepal came as a slap on my face. There was no fixed price and no meters running. The price seemed way too much to me. It was certainly profitable for the hard-working taxi drivers who made their living from the service. But it’s not so good for the passenger’s wallet.

There was a recent news story about a Spanish man travelling to Nepal took the taxi service to reach Thamel (a tourist area of Kathmandu, packed with restaurants and items manufactured by local entrepreneurs). He was happy to discover that the taxi has a digital meter. However, the taxi meters seem to be designed or modified to increase the frequency and amount for the lift. What’s the secret behind how these manipulative drivers get us to pony up?

The Power of Defaults

Although in 2012, the Ministry of Physical Infrastructure and Transport increased the taxi fare by 15.62 per cent, from five rupees to 37 rupees per kilometre (Ekantipur, 2012)[1], Nepalese taxi drivers demand to be paid the price they like. Upon asking to use the taxi meter, they reply back at you – if you can’t afford it why do you even think about it? Consumers then need to choose either to go for it or come to a negotiation, or decide not take the service at all. This interface has increased the disabled act of blind spending more than one could think of.

In Holland, the chances of getting duped by such services were rare. Although digital interfaces make it just easy to make a payment unlike in Nepal were cash is still a king, anyone not wanting to spend more in such services could easily leave. Ironically, with the digital payment system, the transaction does not make any difference until you get into your online payment page and look for the remaining amount. That peek-a-boo of yours will give you a heart attack. So in the end, you are spending more than your budget. However, punching pin codes are easier than counting cash.

This is why the consumers try to make an effort to take the easiest route possible; they do whatever requires the least amount of physical and cognitive effort. In this case, one needs to be more proactive and quick. Duping the dupers isn’t an easy game!

Reducing the Pain of Paying more

While the system in Holland makes it easier for customers when it comes to their money, they also eliminate what Duke Professor Dan Ariely calls the pain of paying. Ariely states, “The agony of parting with our money has to do with the saliency of (seeing) this money going away.” In other words, the less real money feels, the less painful it is to spend, and, subsequently, we spend more of it. However, it’s quite opposite in Nepal.

In Nepal, customers are bound to carry bundles of cash with them and still end up being cheated. With digital payment systems, customers simply press a few buttons with their fingers and the funny money is gone, just like in a casino. Unfortunately, such services are limited. The ban of the registration of new taxi service by the Government of Nepal since 2000 to correct the marketplace imperfection has resulted in such syndicates and the subsequent rise in taxi fare. However, the ban on the syndicates was not fully implemented (Krishnan, 2014)[2], which unfortunately allowed the activities of such cartels to foster.

Government, policy makers and entrepreneurs (small or big) should further explore alternative payment interfaces that can balance the convenience of paying and its corresponding spending. The problem can also be solved by promoting healthy competition and free market economy. Most importantly, either the price must be fixed for a certain distance or a taxi meter that can’t be tampered with should be introduced so that the customers aren’t cheated into paying more. Furthermore, regular inspections of the meters should also be put in place. Consumers also need to be more aware of their rights and stop encouraging such syndicates by using alternative modes of transports.